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How Trade Credit Insurance works

This infographic shows how trade credit insurance works between the Policyholder and their Customer.

1. Credit Sales Agreement

Manufacturer A, the policyholder, agrees to supply goods to customer B on credit with 30-day payment terms.

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2. Financial Difficulty

Customer B experiences financial difficulty with increasing bad debts and cash flow problems.

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3. Insolvency

As a result of their financial difficulties, customer B becomes insolvent and is unable to pay their debts to manufacturer A.

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4. Credit Insurance Monitoring 

The credit insurer monitors creditworthiness of customer B's and alerts manufacturer A that cover will be withdrawn as a last resort.

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5. Claim on Credit Insurance Policy

Manufacturer A can claim on their credit insurance policy for goods supplied prior to cover being withdrawn.

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6. Preventing Bad Debts 

By claiming on their credit insurance policy, manufacturer A is able to continue trading, avoiding bad debts that could have affected their ability to continue trading and pay their suppliers.

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